MARKETS UPDATE (5:00 pm EDST)
We are now at the end of our strong reversal zone for equities (and other markets) - May 21 - June 2 (we are extending it one day into Wednesday). The DOW, S&P 500 and NASDAQ continue to climb today with all three making new weekly highs. The S&P 500 is very close to making a new all-time high, the DOW is fairly close to doing the same, but the NASDAQ is quite far from its all-time high. If the S&P 500 and/or the DOW make new all-time highs by Wednesday without the NASDAQ, that would give us a bearish divergence signal and a possible opportunity to sell short. However, Wednesday is the end of our reversal zone. If all three indices continue rallying past Wednesday, it means we might have to look to our next reversal zone in June for another peak before the start of any significant correction. That reversal zone is not as strong as the current one, but it is considerably wider - June 10-28. That one is then immediately followed by another stronger reversal zone June 28 - July 7. We are therefore about to enter (starting Thursday next week) one massive reversal zone from June 10 through July 7. This could be tricky as there could be multiple reversals in that time frame. For now, let's see if this market wants to reverse by Wednesday. If a significant top seems to be forming, we may try to sell short again, but any rallying past Wednesday will likely keep us on the sidelines and looking for a top in that upcoming new reversal zone. We are still on the sidelines of the broad stock market.
Last week gold made a new weekly high without silver. Today, gold is making another new weekly high ($1919), but silver is still below its $28.65 high from May 18. Thus our intermarket bearish divergence signal continues as we start the new month of June. We are still within our general reversal zone (May 21 - June 2), which ends this Wednesday, so a top could be imminent in both metals. We are still looking for a steep correction and a low to buy - let's say around $1835 in gold and $26.25 in silver. Still on the sidelines of both metals.
Crude oil is making a new weekly high and a new high for its current medium-term cycle (which began on March 23 at $57.18). The first significant sub-cycle low for this medium-term cycle happened on May 21 (at $61.56), and prices have been rallying from there. They could go considerably higher, but we are seeing a new high today still within a reversal zone specifically for crude (which ends on Wednesday). A corrective drop could be imminent, but if prices rally past Wednesday, we may have to wait for another top later in the month before we see any significant correction. If prices do drop now, we may look for a spot to buy; otherwise we will stay on the sidelines as prices rise and test resistance at the $70 level. We are still out of crude oil.
The U.S. Dollar Index has been testing an important support line around 90 over the last three weeks. So far it has been holding above 89. This index has to start rallying soon or it is in trouble. As I have discussed in recent blogs, the U.S, dollar could be ready to take a significant correction if it can't hold above 90. Any plunge in the greenback would likely boost precious metal prices, which is why we watch the dollar so closely. An ideal scenario now for our trading in gold and silver would be to see the dollar rally from this 89-90 support line and push the metal prices down to our targets. From there, we could see the greenback fall again with a break below that 89-90 support that could propel the precious metals to new highs.
We are now at the end of our strong reversal zone for equities (and other markets) - May 21 - June 2 (we are extending it one day into Wednesday). The DOW, S&P 500 and NASDAQ continue to climb today with all three making new weekly highs. The S&P 500 is very close to making a new all-time high, the DOW is fairly close to doing the same, but the NASDAQ is quite far from its all-time high. If the S&P 500 and/or the DOW make new all-time highs by Wednesday without the NASDAQ, that would give us a bearish divergence signal and a possible opportunity to sell short. However, Wednesday is the end of our reversal zone. If all three indices continue rallying past Wednesday, it means we might have to look to our next reversal zone in June for another peak before the start of any significant correction. That reversal zone is not as strong as the current one, but it is considerably wider - June 10-28. That one is then immediately followed by another stronger reversal zone June 28 - July 7. We are therefore about to enter (starting Thursday next week) one massive reversal zone from June 10 through July 7. This could be tricky as there could be multiple reversals in that time frame. For now, let's see if this market wants to reverse by Wednesday. If a significant top seems to be forming, we may try to sell short again, but any rallying past Wednesday will likely keep us on the sidelines and looking for a top in that upcoming new reversal zone. We are still on the sidelines of the broad stock market.
Last week gold made a new weekly high without silver. Today, gold is making another new weekly high ($1919), but silver is still below its $28.65 high from May 18. Thus our intermarket bearish divergence signal continues as we start the new month of June. We are still within our general reversal zone (May 21 - June 2), which ends this Wednesday, so a top could be imminent in both metals. We are still looking for a steep correction and a low to buy - let's say around $1835 in gold and $26.25 in silver. Still on the sidelines of both metals.
Crude oil is making a new weekly high and a new high for its current medium-term cycle (which began on March 23 at $57.18). The first significant sub-cycle low for this medium-term cycle happened on May 21 (at $61.56), and prices have been rallying from there. They could go considerably higher, but we are seeing a new high today still within a reversal zone specifically for crude (which ends on Wednesday). A corrective drop could be imminent, but if prices rally past Wednesday, we may have to wait for another top later in the month before we see any significant correction. If prices do drop now, we may look for a spot to buy; otherwise we will stay on the sidelines as prices rise and test resistance at the $70 level. We are still out of crude oil.
The U.S. Dollar Index has been testing an important support line around 90 over the last three weeks. So far it has been holding above 89. This index has to start rallying soon or it is in trouble. As I have discussed in recent blogs, the U.S, dollar could be ready to take a significant correction if it can't hold above 90. Any plunge in the greenback would likely boost precious metal prices, which is why we watch the dollar so closely. An ideal scenario now for our trading in gold and silver would be to see the dollar rally from this 89-90 support line and push the metal prices down to our targets. From there, we could see the greenback fall again with a break below that 89-90 support that could propel the precious metals to new highs.
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